Oil (petroleum) Basics
What is crude oil and what are petroleum products?
Crude oil is a mixture of hydrocarbons that formed from plants and animals that lived millions of years ago. Crude oil is a fossil fuel, and it exists in liquid form in underground pools or reservoirs, in tiny spaces within sedimentary rocks, and near the surface in tar (or oil) sands. Petroleum products are fuels made from crude oil and other hydrocarbons contained in natural gas. Petroleum products can also be made from coal, natural gas, and biomass.
Getting (Producing) Oil
Where is U.S. crude oil produced?
Crude oil is produced in 31 U.S. states and in U.S. coastal waters. In 2015, about 65% of U.S. crude oil production came from five states:1
- Texas (37%)
- North Dakota (12%)
- California (6%)
- Alaska (5%)
- Oklahoma (5%)
In 2015, about 16% of U.S. crude oil was produced from wells located offshore in the federally administered waters of the Gulf of Mexico.
Although total U.S. crude oil production generally declined between 1985 and 2008, annual production increased from 2009 to 2015. More cost-effective drilling technology helped to boost production, especially in Texas, North Dakota, Oklahoma, New Mexico, and Colorado.
Many countries produce crude oil
About 100 countries produce crude oil. In 2014, 47% of the world’s total crude oil production came from five countries:
- Russia (13%)
- Saudi Arabia (13%)
- United States (11%)
- China (5%)
- Canada (4%)
1Preliminary data for 2015. Sum of state shares may not equal 65% as a result of independent rounding.
What is offshore?
When someone stands at an ocean beach, they are not at the very edge of the United States.
Although it might seem like the ocean is the nation's border, the border is actually 200 miles away from the land. This area around the country is called the Exclusive Economic Zone (EEZ).
In 1983, U.S. President Ronald Reagan claimed the EEZ in the name of the United States. In 1994, all countries were granted an EEZ of 200 miles from their coastline according to the International Law of the Sea.
The ocean floor extends from the beach into the ocean on a continental shelf that gradually descends to a sharp drop, called the continental slope. The width of the U.S. continental shelf varies from 10 miles to 250 miles (16 kilometers to 400 kilometers). The water on the continental shelf is relatively shallow, rarely more than 500 feet to 650 feet (150 meters to 200 meters) deep.
The continental shelf drops off at the continental slope, ending in abyssal plains that are 2 miles to 3 miles (3 kilometers to 5 kilometers) below sea level. Many of the plains are flat, while others have jagged mountain ridges, deep canyons, and valleys. The tops of some of these mountain ridges form islands where they extend above the water.
Several federal government agencies manage the natural resources in the EEZ. The U.S. Department of Interior's Bureau of Ocean Energy Management and the Bureau of Safety and Environmental Enforcement manage the development of offshore energy resources by private companies. These companies lease areas for energy development and pay the federal government royalties on the energy resources they produce from the ocean. Individual states control the waters off their coasts out to 3 miles for most states and between 9 miles and 12 miles for Florida, Texas, and some other states.
Most of the energy the United States gets from the ocean is oil and natural gas from wells drilled on the ocean floor. Other energy sources are also being developed offshore. Wind turbines are located offshore in several countries, and wind energy projects are being considered in several areas off the Atlantic coast of the United States. Wave energy, tidal energy, ocean thermal energy conversion, and methane hydrates are other energy sources currently being explored.
What Fuels Are Made From Crude Oil?
Source: U.S. Energy Information Administration,
Petroleum Supply Annual (September 2015)
Note: A 42 U.S. gallon barrel of crude oil yields about 45 gallons of petroleum products because of refinery processing gain. The sum of the product amounts in the image is greater than 45 because of independent rounding.
What is a refinery?
Petroleum refineries convert crude oil and other liquids into many petroleum products that people use every day. Most refineries focus on producing transportation fuels. On average, U.S. refineries produce about 19 gallons of motor gasoline, 12 gallons of diesel fuel, and 4 gallons of jet fuel from a 42 gallon barrel of crude oil. More than a dozen other petroleum products are also produced in refineries. Petroleum refineries also produce liquids that are used by the petrochemical industry to make a variety of chemicals and plastics.
Refineries operate 24/7
A refinery runs 24 hours a day, 365 days a year and requires a large number of employees. A refinery can occupy as much land as several hundred football fields.
How crude oil is refined into petroleum products
Petroleum refineries change crude oil into petroleum products that are used as fuels for transportation, heating, paving roads, and generating electricity. Petroleum products are also used as feedstocks for making chemicals.
Refining breaks crude oil down into its various components, which are then selectively reconfigured into new products. Petroleum refineries are complex and expensive industrial facilities. All refineries have three basic steps:
Modern separation involves piping crude oil through hot furnaces. The resulting liquids and vapors are discharged into distillation units.
Inside the distillation units, the liquids and vapors separate into petroleum components called fractions according to their weight and boiling point. Heavy fractions are on the bottom and light fractions are on the top.
The lightest fractions, including gasoline and liquid petroleum gas (LPG), vaporize and rise to the top of the distillation tower, where they condense back to liquids.
Medium weight liquids, including kerosene and diesel oil distillates, stay in the middle of the distillation tower.
Heavier liquids, called gas oils, separate lower down in the distillation tower, while the heaviest fractions with the highest boiling points settle at the bottom of the tower.
After distillation, heavy, lower-value distillation fractions can be processed further into lighter, higher-value products such as gasoline. This is where fractions from the distillation units are transformed into streams (intermediate components) that eventually become finished products.
The most widely used conversion method is called cracking because it uses heat and pressure to crack heavy hydrocarbon molecules into lighter ones. A cracking unit consists of one or more tall, thick-walled, rocket-shaped reactors and a network of furnaces, heat exchangers, and other vessels.
Cracking is not the only form of crude oil conversion. Other refinery processes rearrange molecules to add value rather than splitting molecules.
Alkylation, for example, makes gasoline components by combining some of the gaseous byproducts of cracking. The process, which essentially is cracking in reverse, takes place in a series of large, horizontal vessels and tall, skinny towers.
Reforming uses heat, moderate pressure, and catalysts to turn naphtha, a light, relatively low-value fraction, into high-octane gasoline components.
The finishing touches occur during the final treatment. To make gasoline, refinery technicians carefully combine a variety of streams from the processing units. Octane level, vapor pressure ratings, and other special considerations determine the gasoline blend.
Both incoming crude oil and the outgoing final products need to be stored. These liquids are stored in large tanks on a tank farm near the refinery. Pipelines then carry the final products from the tank farm to other tanks across the country.
Oil & the Environment
How does oil affect the environment?
Crude oil is used to make petroleum products used to fuel airplanes, cars, and trucks; to heat homes; and to make products like medicines and plastics. Although petroleum products make life easier, finding, producing, and moving crude oil may have negative effects on the environment. Technological advances in exploration, production, and transportation of oil and enforcement of safety and environmental laws and regulations help to avoid and reduce these effects.
Technology helps reduce the effects of drilling and producing oil
Exploring and drilling for oil may disturb land and marine ecosystems. Seismic techniques used to explore for oil under the ocean floor may harm fish and marine mammals. Drilling an oil well on land often requires clearing an area of vegetation. These impacts are reduced by technologies that greatly increase the efficiency of exploration and drilling activities. Satellites, global positioning systems, remote sensing devices, and 3-D and 4-D seismic technologies make it possible to discover oil reserves while drilling fewer exploratory wells. Mobile and smaller slimhole drilling rigs reduce the size of the area disturbed by drilling activities. The use of horizontal and directional drilling makes it possible for a single well to produce oil from a much larger area, which reduces the number of wells required to develop an oil field.
An oil production technique known as hydraulic fracturing is used to produce oil from shale and other tight geologic formations. This technique has allowed the United States to increase domestic oil production significantly and reduce the amount of oil that the country imports. There are environmental concerns associated with hydraulic fracturing. Fracturing rock requires large amounts of water, and it uses potentially hazardous chemicals to release the oil from the rock strata. In some areas of the country, significant use of water for oil production may affect the availability of water for other uses and can potentially affect aquatic habitats. Faulty well construction or improper handling may result in leaks and spills of fracturing fluids.
Hydraulic fracturing also produces large amounts of wastewater that may contain dissolved chemicals and other contaminants, which may require treatment before disposal or reuse. Because of the quantities of water used, and because of the complexity of treating some of the wastewater components, treatment and disposal are important and challenging issues. Wastewater is frequently disposed of by injection into deep wells, typically into nonpotable saltwater aquifers. The injection of wastewater can cause earthquakes that are large enough to be felt and that may cause damage.
Most oil spills are the result of accidents at oil wells or with the pipelines, ships, trains, and trucks that move oil from wells to refineries. Oil spills contaminate soil and water and may cause devastating explosions and fires. The federal government and industry are involved in developing standards and regulations to reduce the potential for accidents and spills along with effective responses to clean up spills when they occur.
After the Exxon Valdez oil spill in Prince William Sound, Alaska, in 1989, the U.S. Congress passed the Oil Pollution Act of 1990, which required all new oil tankers built for use between U.S. ports to have a full double hull. This act led the International Maritime Organization to also establish double-hull standards for new oil tankers in 1992 in the International Convention for the Prevention of Pollution from Ships (MARPOL). The amount of oil spilled from ships dropped significantly during the 1990s partly because of these double-hull standards.
The Deep Horizon drilling rig explosion and oil spill in the Gulf of Mexico in 2010 caused the U.S. government and the oil industry to review drilling technologies, procedures, and regulations to reduce the potential for similar accidents to occur. The U.S. government also replaced the Minerals Management Service (MMS), which administered offshore oil and natural gas leases, with the Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE) to provide more effective oversight and enforcement of environmental regulations related to offshore energy development.
In response to several major accidents involving trains carrying crude oil, the U.S. Department of Transportation has proposed new standards for railroad tank cars, braking controls, and speed restrictions to reduce the potential for railroad accidents and oil spills.
Restoring old well sites and creating artificial reefs
Oil wells are plugged when they become uneconomic, and the area around the well may be restored. Some old offshore oil rigs are tipped over and left on the sea floor in a Rigs-to-Reefs program. Within a year after a rig is toppled, it is often covered with barnacles, coral, sponges, clams, and other sea creatures. These artificial reefs attract fish and other marine life, and they have increased fish populations and recreational diving opportunities.